SIFMA 2011 Annual Meeting: Donald Kohn, Former Vice Chair, Federal Reserve System (2006-2010)

Former Vice Chair of the Federal Reserve System Don Kohn affirms, "we want a vital financial system but one that doesn't threaten the fabric of the economy." He states that risk in the earlier part of the decade was not being managed or dispersed properly, but reminds us that there have been debt crises many times throughout history. Mr. Kohn believes the Fed has become controversial because, "we took this unused piece of the Federal Reserve Act to provide liquidity and stabilize the system." He feels this authority was justified but misinterpreted by the public as the Fed helping the financial sector and not the rest of the economy. "It is important that people have a chance to rise. If the top is getting richer faster, that is not a problem if the bottom is also getting richer," he says. "The problem is the median has risen very slowly while the top has risen very rapidly." He adds that bridging the gap will take time. Mr. Kohn remains optimistic that we will get our arms around the fiscal situation in this country.

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